2015 Budget Injects Billions into Small Business and Start-ups

A $5.5 billion package for small businesses, a “fairer” system of tax that squeezes tax-avoiding multinationals and a growing deficit are the highlights of this year’s Federal Budget.

Asset Write-Off

Federal Treasurer, Joe Hockey, has encouraged all small businesses to “get out there and have a go”. The mammoth $5.5B package will benefit more than 2 million small businesses. Part of the package is to allow small businesses to make immediate deductions on assets valued under $20,000 – a twenty-fold increase from the previous threshold.

Small businesses have until 30 June 2017 to take advantage of this ambitious asset write-off, which is forecast to cost $1.8B.

“Cars and vans, kitchens and machinery — anything under $20,000 is immediately 100 per cent tax deductible from tonight,” Mr Hockey proudly announced in his budget delivery.

This uncapped stimulus has been criticized as unstable and susceptible to a budget blowout, but the Treasurer argues that the more the measure is utilised, the more the economy should benefit.

Encouraging Start-Ups and Entrepreneurship

To further boost entrepreneurial endeavour, start‑ups will be allowed to immediately deduct professional expenses incurred when they start a business, such as legal expenses on establishing a company, trust or partnership; rather than writing them off over five years. This will provide immediate cash flow benefits for small business.

The Federal Government will also remove obstacles to crowd sourced equity funding. In turn, this will help promote small businesses access to finance by increasing the availability of innovative sources of funding.

Tax Cuts for Businesses

In addition, after 1 July 2015, small businesses with annual revenue of less than $2M will receive a 1.5% tax cut bringing the overall tax rate to its lowest point since 1967 at 28.5%.

This tax cut will also apply to unincorporated businesses like contractors and sole traders that pay income tax instead of company tax. As with the incorporated business tax cut, this measure will only apply to businesses that earn less than $2M in annual revenue. There will also be a 5% discount on any tax paid on income from the business, with an annual cap of $1000.

Abolishment of Fringe Benefits Tax

Hockey also announced that part of the package aimed at stimulating small business and the economy would include doing away with the fringe benefits tax on work-related, portable electronic devices, and lowering the tax burden on employee share schemes.

Conclusion

If you run a startup and are considering starting a business, you can now deduct any professional fees, including legal and accounting, when setting up a company, trust or partnership.

If you would like advice on moving from a sole trader to a company or trust, or would like assistance with the legal documents to start or grow your business, please contact LegalVision on 1300 544 755 and take advantage of our special Start-up package.